One of the primary questions we get at Nautical Monkey is about boat sharing contracts and syndicate agreements. Specifically what are the primary questions we should be asking, where we can find sample agreements, and what kind of partnership should we create.
We will be publishing a set of articles about boat sharing contracts in the next few weeks starting with this one, “Questions to consider for any boat sharing agreement.” We will also be revamping our sample boat sharing agreement library to include a sample partnership / syndicate agreement, and a revised bareboat charter agreement.
BOAT SHARING AGREEMENT
So, let’s get started. The following is a list of questions that you and your partners should discuss before entering into any boat sharing agreement.
How will the boat be owned?
Equal parts according to the number of partners or some other arraignment.
General Maintenance and Other Maintenance of the boat / Division of Operating Expenses – Will a new account be set up for the partnership? Will partners deposit a fixed amount at the beginning of each year, or will expenses be dealt with on a month to month basis?
What will be the dollar or labor contribution by each partner for expenses such as costs and expenses incurred for upkeep, insurance, storage etc?
Who Can Perform Maintenance Work?
Will you use only a third party maintenance shop that you all agree on ahead of time? Possibly generate a list of general maintenance items and a list of other types of maintenance.
How will management be handled?
Will each partner maintain the boat for a year and then the responsibility be moved to the next partner?
Will the managing partner have complete discretion to draw funds from the account that was set up for the partnership or will multiple signatures be required? Or, will a single partner be responsible for management and be compensated in some way?
Anticipated Costs – Possibly provide a list including taxes, registration, insurance, fuel, repairs, improvements, cleaning, maintenance, etc. Will all costs be shared equally regardless of whether each partner makes use of the boat during his/her designated exclusive periods of possession?
What if one of the partners is out of the country for an extended period of time? Will costs be redistributed? Can a partner put their membership/payments on hold during that time?
Record Keeping – Will the managing partner provide a monthly expense report for all the partners? Will each partner keep a record of expenses they have incurred for the month?
Damage to Boat (during a partner’s use) – Define normal wear and tear. How will you handle anything that isn’t normal wear and tear? Will the partner who incurred the damage be responsible for the deductible?
Insurance – List each partner as an additional insurance on the policy.
Return of Boat – Where will the boat be located and be returned to? Consider setting rules for state of cleanliness and fueling requirements when the boat is returned.
Rotation Schedule – What is the schedule for each partner’s exclusive period of possession and use? Use an online calendaring system such as Nautical Monkey or does each partner have a static period of use?
Dispute resolution – Consider naming a neutral third party mediator up front.
Boat Operations Manual – Do you want to have a brief operations manual that all partners must follow?
Buy Out/ Bail Out of a partner – How can a partner leave the partnership? What if a partner is not able to pay anymore? What if a partner just wants out of the partnership?
Transfer of Interests: Provide information and steps to follow regarding the how and when partnership interests and rights may be transferred.
Rules for Valuation– If a partner wants to buy the others out, or you agree to sell the boat, will you use a pre-declared value already stated in the agreement? Would you use current fair market value?
Handling Selling Expenses – How will this be handled in the event that the boat is sold?
Term –How long will the partnership last?
Dissolution of the Partnership – How can the partnership be dissolved?
Death/ Divorce/ Right of Survivorship– What will happen if a partner passes away or gets a divorce?